An American author who has faced lawsuits for her writings about terrorism financing has sparked a burgeoning legal movement in the United States.

In recent weeks, there has been a flurry of legislative activity taking aim at the growing number of libel lawsuits filed against American authors in foreign courts. Bills have been introduced in both the House and Senate aimed at combatting what critics label “libel tourism,” and last month New York State signed into law the Libel Terrorism Protection Act.

The legislative push is the result of a legal battle waged on both sides of the Atlantic by Israeli-born American author Rachel Ehrenfeld and Saudi billionaire Khalid bin Mahfouz over Ehrenfeld’s claim that the Saudi financed terrorist groups including Al Qaeda.

In broader terms, the clash is pitting the American bedrock belief in the First Amendment against a more aggressive legal posture adopted by some Arab individuals who feel their names have been sullied as a result of the debate over global terrorism.

“The legal dispute between Khalid bin Mahfouz and Rachel Ehrenfeld concerning the issue of libel represents a clash of values,” said Eric Gander, an associate professor in the department of communication studies at New York’s Baruch College. “England today appears to place a high value on protecting the ‘good name’ of those who deservedly possess one, by seeing to it that individuals who make statements about another take responsibility to ensure that those statements are true. Current American libel law appears to reflect the judgment that protecting free speech is worth the risk of undeserved injury to a person’s good name.”

The main battleground has been Britain, where defamation plaintiffs from around the world have taken their cases because English law places the burden of proof on defendants. While such celebrities as Cameron Diaz and Roman Polanski have been the main users of Britain’s more liberal laws — suing publications that have reported on their contretemps — moguls from Eastern Europe and the Gulf have used British courts to fight allegations of corruption or terrorism financing. Such efforts have been bolstered by the globalization of the publishing industry through the Internet and online book sales, which has allowed plaintiffs to sue for material not even published on British soil.

One of those plaintiffs is bin Mahfouz, a prominent Saudi banker. In the book “Funding Evil: How Terrorism Is Financed and How To Stop It,” Rachel Ehrenfeld identified bin Mahfouz as a funder of terrorism, mostly through charities reportedly tied to Al Qaeda. After she refused demands from his lawyers that she retract her allegations, bin Mahfouz sued her in 2004 for libel in a British court. Although the book was published only in the United States, the British court accepted jurisdiction on the grounds that 23 copies of the book had been bought in Britain via the Internet. After Ehrenfeld declined to appear before a London tribunal, a default judgment against her was issued, asking that she declare her writings about bin Mahfouz to be false, publish a correction and an apology, and pay some $225,000 in damages. She refused, and then she countersued in an American court, arguing that the British libel law violated the First Amendment. In court she also asked that bin Mahfouz be submitted to personal jurisdiction in America. Her suit was rejected in 2006 on jurisdictional grounds, a decision affirmed on appeal last year.

As the New York State Court of Appeals heard arguments in the case late last year, a lawyer affiliated with The David Project, Elizabeth Samson, published an article in The New York Jewish Week on Ehrenfeld’s situation. The next day, Samson got a call from New York Assemblyman Rory Lancman, who said that he was interested in introducing legislation to address the problem. Lancman and Senate Deputy Majority Leader Dean Skelos sponsored the Libel Terrorism Protection Act, known as “Rachel’s Law.”

New York State passed the bill, which was signed into law April 30 by Governor David Paterson. It grants writers legal protection in local courts if they are sued for libel in foreign countries and prohibits the enforcement of a foreign libel judgment unless a local court determines that it satisfies the free-speech and free-press protections guaranteed by the First Amendment and the New York State Constitution. No other state has passed such legislation, but advocates are hoping that the New York bill will ignite a nationwide legislative effort to protect free speech.

On May 7, senators Arlen Specter and Joseph Lieberman announced the introduction of the Free Speech Protection Act of 2008, following the introduction of a similar bill in the House by New York Representative Peter King.

Some critics are concerned that the new legislation would extend American jurisdiction to a point that violates notions of due process.

“I am sure if the libel plaintiff comes here to challenge the lawsuit, the issue of due process will be raised,” said Slade Metcalf, an attorney with Hogan & Hartson in New York.

But First Amendment advocates have said it is the right move.

“Legislation of the sort passed by the New York legislature… is exactly the right response to make to the increasingly dangerous tendency of foreign courts — particularly English courts — in punishing the speech of American citizens in a manner that cannot begin to comport with the First Amendment,” said Floyd Abrams, a leading First-Amendment lawyer based in New York.

Legal experts said that the New York statute essentially codifies a 1992 decision by a New York court not to enforce a foreign libel judgment. In addition, the new law grants local courts personal jurisdiction over the foreign individual who filed for libel abroad.

Bin Mahfouz’s lawyers have maintained that they never intended to enforce the judgment in the United States or to collect damages. They argue that Ehrenfeld has been seeking merely to vindicate her reputation, and they note that she could have challenged the British jurisdiction on her case but decided against it.

Her supporters counter that British libel laws have had a chilling effect on the British media and on foreign publishers, especially on sensitive topics such as terrorism. The British subsidiary of Random House, for instance, decided against publishing the best-seller “House of Bush, House of Saud: The Secret Relationship Between the World’s Two Most Powerful Dynasties” by Vanity Fair columnist Craig Unger to avoid potential libel action. Eventually another publisher distributed the book in the United Kingdom.

While the New York law will protect Ehrenfeld from having to pay the damages ordered by the British ruling, legal experts say it will not allow her to reach her other objective, which is to force bin Mahfouz to make a deposition in the United States that would provide some answers to the allegations over which both sides have been furiously battling in the past four years.